* Stake falls to 4.64% from 11.5%
* Falls to sixth largest stakeholder from second
* Staffline shares down nearly 3% (Recasts to show stake diluted, adds detail, shares)
By Samantha Machado and Pushkala Aripaka
July 22 (Reuters) - Cat Rock Capital's stake in Staffline Group Plc has fallen by more than half after the activist investor did not participate in the recruiter's latest placement, a regulatory filing on Monday showed.
Staffline this month issued 12.8 million shares and raised nearly 7 million pounds ($8.7 million).
U.S.-based Cat Rock Capital's stake has fallen to 4.64% from 11.5% on July 16, an official filing showed.
Cat Rock, founded by Alex Captain, will now be Staffline's sixth largest shareholder, down from second, Refinitiv Eikon data showed.
Other Staffline investors including Octopus Investments and General Equity Partners have also seen their stakes fall, filings showed.
The British recruiter in June reported a 2018 loss after it booked a charge for potential fines for underpaying workers and said it would raise capital to cut debt, wiping a quarter off its market value.
Staffline is also facing regulatory challenges with UK's tax authority HMRC and an independent advisor looking into whether historically it had complied with minimum wage regulations.
Activist investors like Elliott Capital Advisors have become increasingly active in UK businesses.
Since late 2018, Cat Rock has stepped up its campaign for changes at Just Eat Plc, urging the online takeaway service to appoint a new CEO and seek a merger with a peer.
Staffline shares, which have lost nearly 90% of their value this year, were down 2.8% at 129.8 pence as of 0930 GMT.
$1 = 0.8021 pounds Reporting by Samantha Machado and Pushkala Aripaka in Bengaluru; editing by Jason Neely